The firm wants to give retail investors access to infrastructure assets that are used by pension funds and other institutional investors as a way of diversifying away from traditional assets with a degree of protection from inflation.
The VCTs will invest in companies that own and operate essential assets and services. Investments may include Government-backed private finance initiative projects.
Foresight says its investment will be lower risk relative to traditional VCTs because they will tend to be operating and generating revenues based on long-term contracts backed by the Government or blue-chip companies. Investment in projects in the construction stage will only be made if the construction risk is covered by contractual arrangements.
Some infrastructure assets do not qualify for inclusion in VCTs but among those that do, Foresight has identified opportunities in areas such as street lighting, waste recycling and solar power systems. It says the current economic climate and Government spending cuts will not impact on its ability to find suitable investments because old and worn infrastructure will still needs repairing and investment in waste management and energy efficiency is needed to meet statutory requirements.
Foresight expects its infrastructure investments to provide a stable and predictable income stream with low correlation to economic, business and market cycles and relatively low default rates. It believes these factors make this area very attractive to investors when combined with VCT tax benefits, such as income tax relief and tax-free distributions. Other notable features include a zero discount buyback policy and the ability for investors to remain invested after the planned exit date in five years’ time.
Foresight will not generally compete for opportunities with the big infrastructure funds that focus on toll roads, airports and other major projects, or funds that invest in accommodation-based PFI projects. This may a good thing but may restrict the types of opportunities available to the Foresight VCTs.